Court File and Parties

COURT FILE NO.: CV-08-7670-00CL DATE: 20180913 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: CANADIAN NATIONAL RAILWAY COMPANY, Plaintiff

AND:

SCOTT PAUL HOLMES, JENNIFER LYNN PARISIEN, ALSO KNOWN AS JENNIFER LYNN FLYNN IN HER PERSONAL CAPACITY AND AS THE SOLE PROPRIETOR AND OPERATING AS EFFICIENT CONSTRUCTION, JANICE SHIRLEY MAUREEN HOLMES, MURRAY FUSSIE, SCOTT ALBERT POLE, RICK SOUSA, IN HIS PERSONAL CAPACITY AND OPERATING AS TRAX UNLIMITED, MICHAEL SOUSA, IN HIS PERSONAL CAPACITY AND OPERATING AS TRAX UNLIMITED, JULIE SOUSA, 2035113 ONTARIO LTD., COMPLETE EXCAVATING LTD., operating as, MONTEREY CONSULTING & CONSTRUCTION LTD., 2071438 ONTARIO LTD., operating as Complete Trax, 2071442 ONTARIO LTD., THE SCOTT HOLMES LIVING TRUST, THE JENNIFER LYNN FLYNN LIVING TRUST, GREYSLONE LTD., BELVIEW MANAGEMENT LTD., ERIC LONG and 1340619 ONTARIO LTD., operating as Monterey Consulting & Construction Ltd., Defendants

BEFORE: S.F. Dunphy J.

COUNSEL: Brendan F. Morrison, Nilou Nezhat, for the Plaintiff R. Leigh Youd, for the respondent Tom Brown Robert Allan Klotz, for the respondents Greyslone Ltd., Belview Management Ltd. Marc Kestenberg and James Parker, for the respondent Angela Assuras Bill Michelson, counsel for non-party Robert Lof

HEARD at Toronto: June 27, 2018

Reasons for Decision

[1] On June 27, 2018, I issued the following endorsement on this matter (transcribed by me with contractions and abbreviations expanded):

This is a motion to obtain production of files and examination for discovery of three non-parties: Mr. Brown, Mr. Lof and Ms. Assuras. They are all lawyers.

The plaintiff moving party asserts that each of these three lawyers has never been retained by anyone with authority to retain them on behalf of the defendants Greyslone or Belview.

Mr. Lof and Mr. Brown – through counsel – take no position. Ms. Assuras opposes and is supported in that by current counsel for Greyslone and Belview, Mr. Klotz.

The origins of this dispute go back to a Mareva and Anton Pillar order made on August 8, 2008. Notice was given of the intended motion and, in the period after notice was given, $661,000 was transferred by one of the parties eventually covered by the Mareva to Mr. Brown – purportedly for Greyslone – and Mr. Brown transferred the funds to Mr. Lof.

The existence of any loan underlying that transfer is in dispute. A law suit followed naming Greyslone and Belview in relation to the funds transfer. Ms. Assuras defended that suit on behalf of Greyslone and Belview. Greyslone also purported to counterclaim against CN.

I say “purported” both because of the status of those two companies and the retainer issue.

It turns out Greyslone and Belview were both struck from the corporate register in the Bahamas in 1998. They were not restored until 2017.

On October 12, 2016, Hainey J. granted CN summary judgment against Greyslone and Belview and found the claimed security interests were void and required the $661,000 to be accounted for within 30 days. This was not done.

Hainey J.’s ruling made certain findings of fact including [that] at the time of the transactions in question, neither Greyslone nor Belview had any legal status. His order has not been appealed and is res judicata.

Subsequent to his ruling, Greyslone and Belview have been revived under Bahamian law. The statute provides that the effect of the order restoring them to the Register is that their striking off is deemed never to have occurred.

There is conflicting legal opinion before me (Bahamian opinions) as to the effect of that statutory provision on another provision specifically dealing with the limited category of things that could be validly done while struck from the Register.

Apart entirely from the legal issue of the status of the two corporations, I have the evidentiary issues in relation to Ms. Assuras and her retainer.

Ms. Assuras has never produced a written retainer. She has sworn that her instructions came from Mr. Czerlau and possibly Mr. Maurice.

Neither of these two has admitted to having retained her or to having been involved in managing the affairs of either corporation.

Mr. Maurice was hired (and not paid) to organize documents and told he could be paid if he were made a director. He signed affidavits prepared by others, including Ms. Assuras. He certainly never retained her or instructed her.

Mr. Czerlau’s evidence given in affidavits, discovery and cross-examination is a mass of obfuscation, obstruction and contradiction. He disclaimed involvement with the two corporations at the relevant time and then sought to “correct” those answers later. He has allegedly been made a director post-revival. He refused to name anyone from whom he had been receiving instructions so as to enable his actual authority to be tested. The corporate registers of the two corporations show only nominees and bearer shareholders.

Greyslone and Belview assert today that Ms. Assuras is their lawyer and they assert privilege. This is apparently based on instructions from the same Mr. Czerlau.

I do not accept a word Mr. Czerlau has said or written is other than accidentally true. If anyone has – or had in 2008-2009 – authority to bind these two companies, I have no convincing evidence to displace the heavy pall of suspicion the facts of this case has cast upon them as mere shams or fronts. Such an entity has only a tenuous capacity to assert privilege and must discharge the evidentiary burden of establishing they have done what they now claim they did (retain and instruct Ms. Assuras). I don’t know who has instructed Mr. Czerlau in 2008-2009 or until 2017/2018. I have no reason to believe it was Greyslone or Belview.

I am ordering Ms. Assuras’ file to be sealed and delivered to me. I will examine it to determine what if anything in it may appear to have a privilege to be asserted.

Mr. Kestenberg will have an opportunity to make submissions regarding any documents I find are not privileged and propose to turn over to CN.

In my view this is the only reasonable means of proceeding. The judgment of Hainey J. has been ignored. Mr. Czerlau’s authority in 2008-2017 to do anything on behalf of these two corporations has not been demonstrated and is indeed highly dubious. There has been too much stonewalling.

Mr. Kestenberg submits that CN has not exhausted its options. Mr. Brant and Mr. Nixon – possible directors for the relevant time – could be examined. Mr. Czerlau has not claimed authority from them nor has Ms. Assuras. Both men have only P.O. Box addresses in the Bahamas. That is neither a practical nor a pragmatic objection.

As for Mr. Lof and Mr. Brown: there is no evidence from any source that these were ever retained by the two corporations, validly or otherwise. Further, their files are clearly necessary to pursue the accounting ordered by Hainey J.

Their files will be produced to me as well and their counsel will be permitted to make submissions regarding any documents I propose to turn over to CN.

Oral examinations will take place not later than 30 days after I determine what documents are to be turned over (for all three).

In making this ruling I am expressly not ruling on the question of the status of revival in Ontario, whether Ontario must or should recognize the nunc pro tunc effect of Bahamian law on actions undertaken in Ontario, the res judicata extent of Hainey J.’s order or the conflict in the two legal opinions.

Costs under reserve. Plaintiff’s outline of costs has been received. Reserve includes costs of non-parties being discovered under Rule 31.10.

[2] In response to this endorsement, I have received 7 boxes of material from Ms. Assuras. As might be expected from litigation counsel acting on a matter over a number of years, the bulk of the materials in the boxes consists of copies of motion records, books of authority, productions of the parties, correspondence exchanged between the parties and similar matters. Most if not all of such materials will already be in the possession of CN. In addition to these, there are other things CN will not yet have seen. This includes accounts rendered to the Mr. Czerlau, correspondence exchanged with him or notes taken by Ms. Assuras. I have not attempted to sort the 7 boxes between things CN has seen and things it has not, although it is clear to me that the majority is in the former category.

[3] I have also reviewed the files produced by Mr. Lof and Mr. Brown. These two lawyers were corporate counsel and not litigation counsel. Mr. Lof’s file is a manageable two folders while Mr. Brown’s file occupies an entire box but has been helpfully segregated between documents already part of the court file or produced in the litigation to date (and thus available to the plaintiff) and those which the plaintiff will not yet have had access to.

(i) Files of Ms. Assuras

[4] The corporate searches conducted by the plaintiff in the Bahamas shows the following information in relation to Greyslone and Belview:

Greyslone Ltd. Incorporated: May 29, 1997 Struck from Register: December 31, 1998 Restored to Register: May 18, 2017 Agent: Gavin D. Cassar of Nassau Bahamas

Belview Management Limited Incorporated: February 24, 1997 Struck from Register: December 31, 1998 Restored to Register: May 12, 2017 Agent: Ronald H. Knowles, Nassau, Bahamas.

[5] Mr. Czerlau’s examination for discovery was conducted on April 12, 2016 on behalf of Greyslone and Belview. Ms. Assuras acted as counsel to both companies during that examination. As indicated in my June 27, 2018 endorsement, Mr. Czerlau’s behavior during that examination was highly improper. He refused to answer a very large number of questions, the bulk of which were perfectly proper. Ms. Assuras provided a nearly equal number of objections, the bulk of which were also quite improper and baseless. Mr. Czerlau walked out of the examination on a number of occasions, allegedly to take an “urgent” call.

[6] I have seldom seen such a deliberate and persistent effort at frustrating a legitimate examination for discovery. This conduct was not remedied in any substantive way by the partial answers subsequently provided. The answers given included a number of answers attributed to Mr. Maurice (all disclaiming any memory on his part of the issues raised) although Mr. Maurice denies having been the source of the non-answers attributed to him.

[7] Despite the obstructions and interruptions, some questions were asked and answered. These included the following sworn statements by Mr. Czerlau:

a. He was the “agent” who incorporated the two companies and these were just two of thousands he incorporated at that time; b. He is not a director of either company (note: he has allegedly become a director since the companies were revived in 2017); c. He was engaged in December 2015 as an employee for the purpose of appearing on the examination for discovery; d. As regards the business of Greyslone and Belview from the time of incorporation (1997) until the time he was engaged in December 2015, he does not “have any knowledge of any business that Greyslone or Belview may have conducted other than what [he] gleaned from [his] review of the affidavits of documents” of both corporations; e. When asked to confirm that he had “no involvement with either Greyslone or Belview between May 29, 1997 and on or about Christmas of 2015”, Mr. Czerlau answered “2000, 2001…maybe up to two – you know what? I am not exactly sure so I decline to answer that question”; f. When shown a letter from July 29, 2008, he replied that he “wasn’t involved in the companies at that time”; g. When asked about when Greyslone first became involved with Mr. Holmes, he replied “I was not involved in anything after the incorporation”; h. He declared that he had no knowledge of how the purported loans extended by Greyslone to Mr. Holmes came about; i. He did not know who the registered shareholders were [1] and declined to state from whom he had received instructions or the basis of their authority (an answer that was not supplemented); and j. That the signatures of directors of Greyslone or Belview appearing on documents produced in the litigation may well have been signatures produced from stamps based on his experience and knowledge of the practice of such companies in the Bahamas.

[8] Although the relationship between Greyslone, Belview and Mr. Holmes and his companies was the very subject-matter of the litigation about which Mr. Czerlau was being examined for discovery, he declined to answer almost every question regarding Mr. Holmes and provided barely more in subsequent written answers.

[9] Despite these refusals, the plaintiff’s motion record outlined a number of facts from which meaningful connections between Mr. Holmes, Mr. Maurice, Mr. Czerlau, Mr. Holmes’ wife and Greyview and Belfield can be inferred. I shall return to the matter of negative inferences I may appropriately draw below.

[10] I have reviewed Ms. Assuras’ file. She was also cross-examined on her affidavit on April 12, 2017 (prior to the revival of the two companies). From my review of both sources, I am satisfied that Mr. Czerlau’s answers were intentionally misleading and false. He repeatedly disclaimed any involvement with the companies after 1997 and prior to 2015. Apart entirely from the issues of the legal status of Greyslone and Belview after 1998 and before 2017, there is no evidence in the file or from Ms. Assuras on her cross-examination of any instructions being received by Ms. Assuras from anyone other than Mr. Czerlau. The extent of Mr. Czerlau’s involvement with the two companies in 2009 and later that appears from Ms. Assuras’ cross-examination and the file is fundamentally inconsistent with his sworn testimony in 2016.

[11] In the face of this motion, none of Greyslone, Belview or Mr. Czerlau availed themselves of the opportunity to provide me with any basis to believe that those two companies have ever been anything more than fronts for persons unknown.

[12] Mr. Czerlau’s answers in relation to Mr. Holmes cannot be qualified other than as deliberate stonewalling. If he had no authority, Ms. Assuras had none. Mr. Czerlau has provided no reliable evidence from which it might be concluded that he had such authority while the entire tenor of his evidence leads to the inference that he had none. His testimony and answers to undertakings also leads to the inference that Mr. Holmes has a role in Greyslone and Belview that Mr. Czerlau has sought to shield from view.

[13] In all of the circumstances of this case, I propose to draw negative inferences as regards the bona fides of Greyslone and Belview and to infer that Belview and Greyslone have not been acting at arm’s length to Mr. Holmes at any material time to this litigation. In such circumstances, no claim to privilege can stand. The circumstances justifying such a negative inference include the failure to identify who had authority to act on behalf of the two companies before 2017 and why, the unexplained failure to revive the companies for eight years after their status was first raised in the litigation and Mr. Czerlau’s evasive, misleading and stonewalling behavior during his examination as regards his role in the companies, the litigation and as regards Mr. Holmes. I am also proposing to order that the entire file of Ms. Assuras be produced to the plaintiff and to disallow any and claims for privilege over any portion of the file.

[14] Greyslone and Belview or Ms. Assuras shall have 14 days to state in writing any additional grounds not argued before me on June 27, 2018 as to why I ought not to make the orders and findings I propose to make. I shall not make a final ruling until the deadline passes or I have reviewed the submissions received if any.

(ii) Mr. Brown and Mr. Lof

[15] Neither Mr. Brown nor Mr. Lof opposed the orders sought by the plaintiff. Mr. Brown and his firm acted as corporate counsel for Greyslone when funds were received from Mr. Holmes’ company and transferred the bulk of such funds to Mr. Lof who also purported to act for the same company.

[16] In light of my proposed findings in relation to Ms. Assuras’ file, I also propose to order that the entire files of each also be produced to the plaintiff. I grant the same 14 day period for written submissions to be made to me prior to a final ruling being made.

[17] Costs were reserved at the hearing of this matter. I shall receive submissions as to costs from the parties – including an outline of costs if applicable – within the same 14 day period (any party from whom costs is sought having a further 7 days to respond).

S.F. Dunphy J. Date: September 13, 2018

Footnote:

[1] In subsequent answers provided, Mr. Czerlau produced a shareholders ledger indicating that Greyslone’s sole shareholder is Belview while Belview’s shares are held in bearer form. He did not provide information regarding the beneficial owner or the person from whom he received instructions.